[Federal Register Volume 80, Number 180 (Thursday, September 17, 2015)]
[Proposed Rules]
[Pages 55802-55805]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-23291]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-138344-13]
RIN 1545-BL94


Substantiation Requirement for Certain Contributions

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: This document contains proposed regulations to implement the 
exception to the ``contemporaneous written acknowledgement'' 
requirement for substantiating charitable contribution deductions of 
$250 or more. These proposed regulations provide rules concerning the 
time and manner for donee organizations to file information returns 
that report the required information about contributions (donee 
reporting).

DATES: Written or electronic comments must be received by December 16, 
2015.

ADDRESSES: Send submissions to CC:PA:LPD:PR (REG-138344-13), Room 5203, 
Internal Revenue Service, POB 7604, Ben Franklin Station, Washington, 
DC 20044. Submissions may be hand-delivered Monday through Friday 
between the hours of 8 a.m. and 4 p.m. to: CC:PA:LPD:PR (REG-138344-
13), Courier's Desk, Internal Revenue Service, 1111 Constitution Avenue 
NW., Washington, DC, or sent electronically via the Federal eRulemaking 
Portal at www.regulations.gov (IRS REG-138344-13).

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, 
Robert Basso at (202) 317-7011 (not a toll-free number); concerning 
comments or a request for a public hearing, Oluwafunmilayo Taylor at 
(202) 317-6901 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

    The collection of information contained in this notice of proposed 
rulemaking will be submitted to the Office of Management and Budget in 
accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
3507(d)). Comments on the collection of information should be sent to 
the Office of Management and Budget, Attn: Desk Officer for the 
Department of the Treasury, Office of Information and Regulatory 
Affairs, Washington, DC 20503, with copies to the Internal Revenue 
Service, Attn: IRS Reports Clearance Officer,

[[Page 55803]]

SE:W:CAR:MP:T:T:SP, Washington, DC 20224. Comments on the collection of 
information should be received by November 16, 2015. Comments are 
specifically requested concerning:
    Whether the proposed collection of information is necessary for the 
proper performance of the functions of the IRS, including whether the 
information will have practical utility;
    How the quality, utility, and clarity of the information to be 
collected may be enhanced;
    How the burden of complying with the proposed collection of 
information may be minimized, including the application of automated 
collection techniques or other forms of information technology; and
    Estimates of capital or start-up costs and costs of operation, 
maintenance, and purchase of services to provide information.
    The collection of information in these proposed regulations is in 
Sec.  1.170A-13(f)(18) of the Income Tax Regulations. The collection of 
information is necessary to properly substantiate charitable 
contribution deductions under the exception to the general requirements 
for substantiating charitable contribution deductions of $250 or more. 
The collection of information is required to comply with the provisions 
of section 170(f)(8)(D) of the Internal Revenue Code (Code). The 
respondents are entities that receive charitable contributions and 
donors to such entities. The burden for the collection of information 
contained in proposed regulation Sec.  1.170A-13(f)(18) will be 
reflected in the burden estimate for a form that the IRS intends to 
create to request the information specified in the proposed regulation. 
Once a draft form is available, comments will be invited via a notice 
in the Federal Register and on the IRS Web site.
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless it displays a valid 
control number assigned by the Office of Management and Budget.

Background

    This document contains amendments to the Income Tax Regulations (26 
CFR part 1) under Code section 170(f)(8) governing the substantiation 
of charitable contributions of $250 or more. Section 170(f)(8) was 
enacted by Section 13172(a) of the Omnibus Budget Reconciliation Act of 
1993, Public Law 103-66 (107 Stat. 312, 455 (1993)), effective for 
contributions made on or after January 1, 1994. Section 1.170A-13(f) 
provides rules on substantiation of charitable contributions of $250 or 
more. See TD 8690 (1997-1 CB 68).
    Section 170(f)(8)(A) requires a taxpayer who claims a charitable 
contribution deduction for any contribution of $250 or more to obtain 
substantiation in the form of a contemporaneous written acknowledgment 
(CWA) from the donee organization. Under section 170(f)(8)(B), while 
the CWA need not be in any particular form, it must contain the 
following information: (1) The amount of cash and a description of any 
property other than cash contributed; (2) whether any goods and 
services were provided by the donee organization in consideration for 
the contribution; and (3) a description and good faith estimate of the 
value of any goods and services provided by the donee organization or a 
statement that such goods and services consist solely of intangible 
religious benefits.
    The CWA must also be contemporaneous. Under sections 170(f)(8)(C) 
and 1.170A-13(f)(3), a CWA is contemporaneous if it is obtained by the 
taxpayer on or before the earlier of the date the taxpayer files an 
original return for the taxable year in which the contribution was made 
or the due date (including extensions) for filing the taxpayer's 
original return for that year. In the preamble to TD 8690, the Treasury 
Department and the IRS further emphasized this requirement, noting that 
``[a] written acknowledgment obtained after a taxpayer files the 
original return for the year of the contribution is not contemporaneous 
within the meaning of the statute.'' TD 8690 (1997-1 CB 68).
    Section 170(f)(8)(D) provides an exception to the CWA requirement. 
Under the exception, a CWA is not required if the donee organization 
files a return, on such form and in accordance with such regulations as 
the Secretary may prescribe, that includes the information described in 
section 170(f)(8)(B). When issuing TD 8690 in 1997, the Treasury 
Department and the IRS specifically declined to issue regulations under 
section 170(f)(8)(D) to effectuate donee reporting. The present CWA 
system works effectively, with minimal burden on donors and donees, and 
the Treasury Department and the IRS have received few requests since 
the issuance of TD 8690 to implement a donee reporting system.
    In recent years, some taxpayers under examination for their claimed 
charitable contribution deductions have argued that a failure to comply 
with the CWA requirements of section 170(f)(8)(A) may be cured if the 
donee organization files an amended Form 990, ``Return of Organization 
Exempt From Income Tax,'' that includes the information described in 
section 170(f)(8)(B) for the contribution at issue. These taxpayers 
argue that an amended Form 990 constitutes permissible donee reporting 
within the meaning of section 170(f)(8)(D), even if the amended Form 
990 is submitted to the IRS many years after the purported charitable 
contribution was made. The IRS has consistently maintained that the 
section 170(f)(8)(D) exception is not available unless and until the 
Treasury Department and the IRS issue final regulations prescribing the 
method by which donee reporting may be accomplished. Moreover, the 
Treasury Department and the IRS have concluded that the Form 990 is 
unsuitable for donee reporting.

Explanation of Provisions

    The framework established by these proposed regulations for donee 
reporting under the section 170(f)(8)(D) exception is intended to 
provide for timely reporting, while also minimizing reporting burdens 
on donees and protecting donor privacy.

Manner of Donee Reporting

    The present CWA process requires that the acknowledgement provided 
to the donor contain information useful in preparing the donor's tax 
return for the year of the contribution. To effectively substitute for 
the CWA, any donee reporting process would require not only that an 
information return be filed with the IRS, but also that a copy be 
provided to the donor for use in preparing the donor's federal income 
tax return for the year of the contribution.
    In order to better protect donor privacy, the Treasury Department 
and the IRS have concluded that the Form 990 series should not be used 
for donee reporting. Instead, before finalization of these proposed 
regulations, the IRS intends to develop a specific-use information 
return for donee reporting. Donees are not required to adopt donee 
reporting. Donees who opt to use donee reporting will be required to 
provide a copy of the information return to the donor at the address 
the donor provides for this purpose, and the information return will 
contain only the information related to that donor. The proposed 
regulations are reserved on the particular form that will be prescribed 
for this purpose.
    Section 170(f)(8)(D) provides that a donee organization must 
include the information described in section 170(f)(8)(B) on its return 
for the donor to qualify for the donee reporting exception. 
Accordingly, the proposed

[[Page 55804]]

regulations require that donees who opt to use donee reporting must 
report that information as well as the donor's name, address, and 
taxpayer identification number. The donor's taxpayer identification 
number is necessary in order to properly associate the donation 
information with the correct donor. Unlike a CWA, which is not sent to 
the IRS, the donee reporting information return will be sent to the 
IRS, which must have a means to store, maintain, and readily retrieve 
the return information for a specific taxpayer if and when 
substantiation is required in the course of an examination. The 
Treasury Department and the IRS request comments on the scope of the 
information necessary to verify substantiation of charitable 
contribution deductions under donee reporting.
    The Treasury Department and the IRS are concerned about the 
potential risk for identity theft involved with donee reporting given 
that donees will be collecting donors' taxpayer identification numbers 
and maintaining those numbers for some period of time. The Treasury 
Department and the IRS request comments on whether additional guidance 
is necessary regarding the procedures a donee should use in soliciting 
and maintaining a donor's taxpayer identification number and address to 
mitigate the risk.
    In order to minimize the burden on donees, the proposed regulations 
provide that donee reporting is not required, but may be done at the 
option of a donee organization. If a contribution is not reported using 
donee reporting, then the donor must obtain a CWA. The Treasury 
Department and the IRS request comments on these provisions and whether 
additional guidance is necessary to clarify the requirements for donors 
and donees if the donee chooses to use donee reporting for some or all 
of the contributions it receives. Also, because of the potential burden 
on donee organizations, the Treasury Department and the IRS request 
comments on how the donee reporting process might be better designed to 
minimize donee burden, and how it may interact with the requirement 
under section 6115 to provide donors information regarding quid pro quo 
contributions.

Time of Donee Reporting

    Section 170(f)(8) is premised on donors receiving timely 
substantiation of their donations of $250 or more. The CWA assists a 
donor preparing a return (as well as the IRS examining the return) in 
determining whether, and in what amount, a donor may claim a charitable 
contribution deduction. H.R. Rept. No. 103-111, at 783, 785 (1993), 
1993-3 CB 167, 359, 361; Viralam v. Commissioner, 136 T.C. 151, 171 
(2011); Addis v. Commissioner, 118 T.C. 528, 536 (2002), aff'd, 374 
F.3d 881 (9th Cir. 2004); DiDonato v. Commissioner, T.C. Memo. 2011-
153. It would be inconsistent with the purpose of section 170(f)(8) to 
allow an exception to the CWA requirement of section 170(f)(8)(A) based 
on information that might be reported by a donee on a return that is 
filed many years after the purported charitable contribution was made. 
Rather, any alternative method to using a CWA for substantiating 
charitable contributions through donee reporting must provide timely 
information to both the IRS and the donor in order to satisfy the 
purpose of section 170(f)(8).
    Accordingly, the proposed regulations provide that any information 
return under section 170(f)(8)(D) must be filed by the donee no later 
than February 28th of the year following the year in which the 
contribution is made, and the donee organization must provide a copy of 
the information return to the donor by the same date. An information 
return that is not filed timely with the IRS, with a copy provided to 
the donor, will not qualify under section 170(f)(8)(D).
    February 28th is the date when numerous other information returns 
concerning transactions with other persons must be filed. See, for 
example, Sec.  1.6041-6 (information at source), Sec.  1.6045-1(j) 
(returns of brokers), and Sec.  1.6049-4(g) (returns regarding payment 
of interest). The requirement that a donee organization provide a copy 
of the information return to the donor no later than February 28th of 
the year following the year in which the contribution is made is 
intended to provide donors with timely information needed to claim 
appropriate charitable contribution deductions on their returns, as 
well as to ensure sound tax administration--objectives that will not be 
met if donee reporting is allowed to occur long after the contribution 
was made. In addition, for donors to be relieved of the obligation to 
obtain a CWA, the donee must file the donee reporting information 
return, and communicate that it has done so to the donor, before the 
due date for the donor's return. The Treasury Department and the IRS 
request comments on the use of February 28th as the due date for filing 
a return and furnishing a copy to a donor.

Proposed Effective Date

    The regulations are proposed to apply to contributions made on or 
after the date of publication of a Treasury decision adopting these 
rules as final regulations in the Federal Register.

Special Analyses

    Certain IRS regulations, including this one, are exempt from the 
requirements of Executive Order 12866, as supplemented and reaffirmed 
by Executive Order 13563. Therefore, a regulatory impact assessment is 
not required. It has also been determined that section 553(b) of the 
Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to 
these regulations.
    It is hereby certified that these regulations will not have a 
significant economic impact on a substantial number of small entities. 
This certification is based on the fact that, to the extent a donee 
reporting system is implemented under section 170(f)(8)(D), the statute 
itself specifies the bulk of the information that needs to be collected 
for purposes of these regulations. The proposed regulations require 
that, in order for a donor to be relieved of the current CWA 
requirement, a donee organization that uses donee reporting must file a 
return with the IRS reporting certain information and must furnish a 
copy of the return to the donor whose contribution is reported on such 
return. These regulations provide the content of the return under 
section 170(f)(8)(D), the time for filing the return, and the 
requirement to furnish a copy to the donor. Moreover, any burden 
associated with the collection of information under the proposed 
regulations is minimized by the fact that donee reporting under the 
proposed regulations is optional on the part of any donee, including 
small entities. Donees need not use this donee reporting process and 
donors can continue to use the current CWA process. Given the 
effectiveness and minimal burden of the CWA process, it is expected 
that donee reporting will be used in an extremely low percentage of 
cases.
    Based on these facts, a Regulatory Flexibility Analysis under the 
Regulatory Flexibility Act (5 U.S.C. chapter 6) is not required.
    Pursuant to section 7805(f) of the Code, this notice of proposed 
rulemaking will be submitted to the Chief Counsel for Advocacy of the 
Small Business Administration for comment on its impact on small 
business.

Comments and Requests for a Public Hearing

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to any written comments that are submitted 
timely to the IRS as prescribed in this preamble under the 
``Addresses''

[[Page 55805]]

heading. The Treasury Department and the IRS request comments on all 
aspects of the proposed rules. All comments will be available at http://www.regulations.gov or upon request.
    A public hearing will be scheduled if requested in writing by any 
person who timely submits comments. If a public hearing is scheduled, 
notice of the date, time, and place for the public hearing will be 
published in the Federal Register.

Drafting Information

    The principal authors of these regulations are Martin L. Osborne 
and Robert Basso of the Office of the Associate Chief Counsel (Income 
Tax and Accounting). However, other personnel from the Treasury 
Department and the IRS participated in their development.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Proposed Amendment to the Regulations

    Accordingly, 26 CFR part 1 is proposed to be amended as follows:

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 continues to read in 
part as follows:

    Authority:  26 U.S.C. 7805 * * *

0
Par. 2. Section 170A-13 is amended by revising paragraph (f)(18) and 
adding paragraph (f)(19) to read as follows:


Sec.  1.170A-13.  Recordkeeping and return requirements for deductions 
for charitable contributions.

* * * * *
    (f) * * *
    (18) Donee organization reporting--(i) Prescribed form. [Reserved]
    (ii) Content of return. A document will not qualify as a return for 
purposes of section 170(f)(8)(D) unless it contains all of the 
following information:
    (A) The name and address of the donee;
    (B) The name and address of the donor;
    (C) The taxpayer identification number of the donor;
    (D) The amount of cash and a description (but not necessarily the 
value) of any property other than cash contributed by the donor to the 
donee;
    (E) Whether any goods and services were provided by the donee 
organization in consideration, in whole or in part, for the 
contribution by the donor; and
    (F) A description and good faith estimate of the value of any goods 
and services provided by the donee organization or a statement that 
such goods and services consist solely of intangible religious 
benefits.
    (iii) Time for filing return. Every donee organization filing a 
return described in section 170(f)(8)(D) shall file such return on or 
before February 28 of the year following the calendar year in which the 
contribution was made. If the return is not filed timely, the return 
does not qualify under section 170(f)(8)(D), and section 170(f)(8)(A) 
through (C) applies to the contribution.
    (iv) Furnishing a copy to donor. Every donee organization filing a 
return described in section 170(f)(8)(D) shall furnish a copy of the 
return to the donor whose contribution is reported on such return on or 
before February 28 of the year following the calendar year in which the 
contribution was made. The copy of the return shall be provided to the 
donor at the address the donor provides for this purpose.
    (v) Donee organization reporting at option of donee. Donee 
organization reporting is not required. Donee reporting is available 
solely at the option of a donee organization, and, the requirements of 
section 170(f)(8)(A) through (C) apply to all contributions that are 
not reported using donee reporting.
    (19) Effective/applicability date. Paragraphs (f)(1) through (17) 
of this section apply to contributions made on or after December 16, 
1996. However, taxpayers may rely on the rules of paragraphs (f)(1) 
through (17) for contributions made on or after January 1, 1994. 
Paragraph (f)(18) of this section applies to contributions made on or 
after the date of publication of a Treasury decision adopting these 
rules as final regulations in the Federal Register.

John Dalrymple,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 2015-23291 Filed 9-16-15; 8:45 am]
 BILLING CODE 4830-01-P